You can often get the IRS to remove penalties, and when a penalty comes off, the interest that accrued on it comes off with it. Getting the IRS to remove penalties and interest outright is realistic for the penalty side through two formal programs — the First Time Abatement waiver and reasonable cause relief — while pure interest abatement is rare and reserved for situations where the IRS itself caused the delay. How much you actually save depends on which program fits your facts and how carefully you document the request.
Why Penalties Come Off and Interest Usually Doesn’t
Penalties and interest look similar on a notice but follow completely different rules. Penalties are charges for noncompliance, and the IRS has published procedures for waiving them. Interest is the cost of borrowing time on money you owed the government, and the agency treats it as compensation rather than punishment. That’s why penalty relief is a well-worn path and interest relief is a narrow exception.
The two penalties most people are trying to get rid of are the failure-to-file penalty and the failure-to-pay penalty. Failure-to-file runs at 5% of unpaid tax per month, capped at 25%.1Internal Revenue Service. Failure to File Penalty Failure-to-pay is 0.5% per month, also capped at 25%.2Internal Revenue Service. Failure to Pay Penalty If your return is more than 60 days late, the minimum failure-to-file penalty is the lesser of $525 or 100% of the tax owed for returns required to be filed in 2026.3Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges
Interest compounds daily on the unpaid balance, including any penalties that have accrued, starting from the return’s original due date. The rate is set quarterly at the federal short-term rate plus three points.4Internal Revenue Service. Quarterly Interest Rates The important point for anyone trying to reduce a bill: when the IRS removes a penalty, it recalculates and reduces the interest that had been running on that penalty. For balances that have sat for years, the interest piece can be larger than the penalty itself, so knocking out the penalty is often the fastest way to shrink the interest too.
First Time Abatement: The Fastest Path
First Time Abatement is the simplest way to get a penalty removed, and it’s the option most taxpayers overlook. It applies to failure-to-file, failure-to-pay, and failure-to-deposit penalties. You don’t have to explain what went wrong or provide any documentation. The IRS grants it based on your compliance record alone.5Internal Revenue Service. Administrative Penalty Relief
Three requirements:
- A clean three-year history. You filed the same type of return for the three tax years before the penalty year and had no unreversed penalties in that window. A prior penalty removed for reasonable cause still counts as clean; one removed through a previous First Time Abatement does not.6Internal Revenue Service. IRM Part 20.1.1 – Introduction and Penalty Relief
- The return for the penalty year is filed.
- The tax is paid in full or you have an active payment arrangement.
You can usually handle this by phone. Call the number on your penalty notice, ask the representative to check whether you qualify for First Time Abatement, and if you do, they can process the removal on the call.7Internal Revenue Service. Penalty Relief No paperwork, no written argument. Try this first before writing anything up.
Reasonable Cause: When You Don’t Qualify for the Waiver
If First Time Abatement isn’t available — say, you had a penalty within the last three years, or you’re dealing with a penalty type it doesn’t cover — the next path is reasonable cause. The standard is that you exercised ordinary business care and prudence but still couldn’t meet your obligation. The bar is higher, and you need documentation.8Internal Revenue Service. Penalty Relief for Reasonable Cause
The IRS looks at what happened, when it happened, and what you did before and after. Not having money isn’t enough by itself; you have to show the lack of funds came from something outside your control and that you moved to comply once you could.
Situations that commonly qualify:
- Serious illness or incapacitation of you or an immediate family member. Support it with hospital records or a doctor’s letter that shows the dates.8Internal Revenue Service. Penalty Relief for Reasonable Cause
- A death in the immediate family during the filing period.
- A natural disaster or casualty that destroyed records or displaced you. Attach evidence of the event and how it affected your compliance.
- Erroneous written advice from the IRS. If you asked the IRS for guidance in writing, gave accurate facts, and followed the incorrect response in good faith, the IRS is required to abate any resulting penalty.9Office of the Law Revision Counsel. 26 USC 6404 – Abatements
The written explanation is what makes or breaks the request. Vague statements get denied. The IRS wants specific dates, a clear line connecting the event to the missed deadline, and evidence that you acted as soon as you could. A mere assertion, without supporting facts, doesn’t satisfy the standard.
Reliance on a tax professional can also count as reasonable cause, though it’s harder to prove. The IRS looks at whether you gave the advisor all the necessary information, whether the advisor was competent in the specific area, and whether it was reasonable for you to rely on them.8Internal Revenue Service. Penalty Relief for Reasonable Cause
When the IRS Will Actually Remove Interest
Interest is not a penalty, and the IRS does not waive it because you had a hard year or filed late. There is one narrow situation where it can come off on its own: when an IRS employee’s unreasonable error or delay caused interest to accrue while your case was being handled.10Office of the Law Revision Counsel. 26 U.S. Code 6404 – Abatements
The delay has to involve a ministerial or managerial act. A ministerial act is procedural work that involves no legal judgment, like mailing a notice or transferring an approved case file. A managerial act covers administrative decisions like reassigning cases or granting employee leave without arranging coverage.11eCFR. 26 CFR 301.6404-2 – Abatement of Interest An IRS agent losing your file for months qualifies. The IRS spending time researching a genuinely complex legal issue in your case does not.
Additional conditions for an interest abatement request:12Internal Revenue Service. Interest Abatement
- The error or delay occurred after the IRS contacted you in writing about the issue.
- Neither you nor your representative contributed to the delay.
- The tax type is income, estate, gift, or certain excise taxes. Employment taxes are excluded.
- The claim is filed within three years of the return filing date or two years of the payment date, whichever is later.
Most standalone interest abatement requests are denied. The more reliable route to shrinking interest is to get the underlying penalty removed and let the automatic recalculation do the work.
How to File the Request
For First Time Abatement, call the number on the penalty notice. Have the notice in front of you. If you qualify, the representative can process the removal on the call.5Internal Revenue Service. Administrative Penalty Relief
For reasonable cause and interest abatement, you file Form 843, Claim for Refund and Request for Abatement. The form asks for your name, taxpayer identification number, the tax period, and the type of penalty. Attach a written explanation of the facts and all supporting documentation. File a separate Form 843 for each tax period and each type of tax; you can’t combine years on one form.13Internal Revenue Service. Instructions for Form 843 Mail it to the service center where the original return was filed. Processing runs anywhere from six weeks to six months.
Watch the deadline. If you already paid the penalty and want a refund, you have to file the claim by the later of three years from the date you filed the return or two years from the date you paid the tax.14Internal Revenue Service. Time You Can Claim a Credit or Refund Miss that window and the money is gone regardless of how strong the case is. If the penalty is still unpaid, you can ask for abatement at any time, but interest keeps compounding daily on what you owe.
If the IRS Denies You
A denial isn’t the end. The rejection letter will explain the reason and lay out your appeal rights.15Internal Revenue Service. Penalty Appeal You can request a conference with the IRS Independent Office of Appeals, where someone who wasn’t part of the original decision reviews the case.16Internal Revenue Service. Appeals Appeals officers have broad settlement authority and often reach outcomes that differ from the first decision.
If Appeals also denies relief, the last stop is the U.S. Tax Court. For deficiency cases you have 90 days from the date the IRS mails a statutory notice of deficiency to file a petition, and the Tax Court cannot extend that deadline.17United States Tax Court. Guidance for Petitioners: Starting A Case For interest abatement, the Tax Court has jurisdiction to review whether the IRS abused its discretion in denying the request.
When to Handle It Yourself and When to Hire Help
Most First Time Abatement requests can be handled with a phone call. Where professional help earns its fee is in reasonable cause cases with significant dollar amounts, accuracy-related penalty disputes involving complex positions, and interest abatement claims that require reconstructing a multi-year timeline of IRS delays.
Tax attorneys typically charge between $200 and $600 per hour for this work, with rates above $1,000 in major metropolitan areas. Enrolled agents and CPAs who specialize in IRS representation are generally less expensive, and some practitioners offer flat-fee penalty abatement work as part of broader tax debt resolution. If the penalty plus accrued interest runs into the thousands, representation often pays for itself. If it’s a $300 penalty on a single late return and your compliance history is clean, make the call yourself.
One boundary worth naming: accuracy-related penalties, the flat 20% penalty the IRS imposes for negligence or substantial understatement of income tax, have their own defenses built around substantial authority and adequate disclosure with a reasonable basis.18Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments If your notice mentions section 6662 rather than late filing or late payment, the abatement approach above still applies for reasonable cause, but the substantive arguments are different and generally worth running past a professional.